Small Inheritance In A Savings Account
I was blessed to have known my great grandparents. Indeed, many don’t get the chance. All have since passed, but I cherished their love and hold fond the memories.
My great grandfather passed away in 1995. In his will, he was kind enough to leave each of his great grandchildren $1,000. He deposited the gift in our own individual savings accounts at the local bank. I was 7 years old at the time, so $1,000 may have been $1,000,000.
As it does, life continued, and I forgot about that $1,000 in the bank. I finished elementary school, proceeded through the awkward teenage years, then headed off to college. I got a job, got married, moved away, and started a family. Now, I myself have 2 kids older than I was when I received that $1,000 gift. 28 years had passed, and I had all but forgotten about my great grandfather’s generous gift.
Dismal Compounded Return
Well, not long ago my brother forwarded me a link to a website for “unclaimed property” after he discovered my name was on it. I hadn’t the slightest clue what that unclaimed property was, but I’m assuming you can guess it….
Yep, it was the $1,000 gift. It had sat in that same savings account, accruing interest, for 28 years! And do you know how much 28 years of compound interest nets you in a savings account? Approximately $100…that works out to a 0.35% APR! So, after 28 years, I withdrew all funds from the account, all $1,100 worth.
Missed Opportunity
This story wouldn’t be so depressing if I hadn’t done a comparison of how much that $1,000 would have returned if invested in the S&P 500 index over the same period. Exhibit 1 shows the depressing results. That same $1,000 would’ve been worth over $8,000 today, which works out to a CAGR (compound annual growth rate) of 8%. Mind you, this period spanned the dot com bubble, Great Financial Crisis, and COVID-19.
Lesson Learned
Hence the title of this article. While I’m grateful for the selfless gift left to me by my great grandfather, I lament the fact it wasn’t invested in a superior asset such as a S&P 500 mutual fund or ETF. It truly was a $7,000 missed opportunity.
So, parents and great grandparents, I hope you take this message to heart and choose an appropriate investment vehicle for any generous gifts (we thank you) you leave to your children or great children…. lest you end up in a blog some 30 years later.
